Federal Trade Commission v. Vyera Pharmaceuticals, LLC

Background

The Federal Trade Commission and seven states sued Vyera Pharmaceuticals, LLC, Phoenixus AG, Martin Shkreli, and Kevin Mulleady. The amended complaint asserted claims under Sections 1 and 2 of the Sherman Act, Section 5(a) of the Federal Trade Commission Act, and various state statutes. The defendants had moved to dismiss, arguing in part that the complaint did not allege ongoing violations and did not adequately allege that Shkreli and Mulleady personally participated in unlawful conduct. The court had largely denied those motions.

After the defendants filed answers, the plaintiffs moved under Federal Rule of Civil Procedure 12(f) to strike three affirmative defenses. An affirmative defense is a defendant’s assertion that, even if the complaint’s allegations are true, additional facts or legal arguments defeat the plaintiff’s claim.

The Challenged Defenses

The corporate defendants and Shkreli asserted a fourth defense stating that the plaintiffs’ claims were barred because the defendants were not alleged to be engaged in ongoing violations of law, as required by Section 13(b) of the Federal Trade Commission Act and New York Executive Law Section 63(12). The corporate defendants proposed revising the defense to argue that Vyera was not engaged in ongoing violations when the complaint was filed.

Shkreli separately asserted that the claims were barred because he had not signed agreements with certain entities and because he personally did not possess market or monopoly power.

Court’s Analysis

The court held that the fourth defense improperly sought to reargue the sufficiency of the amended complaint and the court’s earlier denial of the motion to dismiss. The defendants had already had an opportunity to challenge the complaint. The court also rejected the proposed revision, ruling that it was not an affirmative defense, misstated the plaintiffs’ burden, and did not identify facts or law that would defeat the plaintiffs’ right to relief.

The court rejected the argument that the fourth defense concerned subject-matter jurisdiction. It held that the action arose under federal law and that the relevant provision of the Federal Trade Commission Act did not limit the court’s subject-matter jurisdiction.

The court also held that Shkreli’s thirteenth and fifteenth defenses were legally insufficient. The plaintiffs did not need to prove that Shkreli personally signed agreements with distributors or personally possessed market power. The court relied on its earlier ruling that performing the activities described in the amended complaint as a corporate officer or agent could be sufficient to subject a defendant to liability for antitrust violations.

Disposition

The court concluded that the challenged defenses did not provide a legally sufficient basis to prevent the plaintiffs from prevailing and that keeping them would prejudice the plaintiffs by improperly adding to their trial burden and narrowing the grounds for potential liability. The plaintiffs’ October 6, 2020 motion to strike was granted.